Austan Goolsbee, head of the Federal Reserve Bank of Chicago, described a hotter-than-expected jump in the consumer price index (CPI) in October as “borderline disturbing” during a Tuesday interview with PBS NewsHour.

The CPI report that landed Tuesday morning showed inflation rose 0.4% on a monthly basis in October, faster than consensus forecasts. But it was just the latest in a series of inflation readings that show price hikes accelerating and broadening across the U.S. economy since the second quarter.

After a quarter-point rate hike in September, the decision by the rate-setting Federal Open Market Committee (FOMC) to not tighten policy further in October has raised the prospect of a jumbo half-point hike in December.

Advertisement

Goolsbee, who was not a voting member of the FOMC in 2026 but will cycle into that role in January, was hesitant to fully endorse the more aggressive action — but did not fully reject it either.

“Several of these things that have been driving up costs were supposed to have gone away by now,” said Goolsbee, citing ongoing pressures from tariffs and the Iran war.

Inflationary impacts of the AI build-out

Regardless of how the FOMC votes in December, the composition of the committee will shift at the January meeting as four regional Fed presidents, including Goolsbee, bring their districts’ ails to bear on policy.

Goolsbee said policymakers need to be clear-eyed about the way consumer price data and the market feedback he hears are increasingly aligned.

“Everywhere I go out here in the Chicago Fed’s district, kind of the heart of the Midwest, it’s on everyone’s mind,” he said. “It’s on businesses’ minds. It’s on nonprofits’ minds. It’s on ordinary consumers’ minds.”

Supply-side cost pressures from energy market disruptions and President Donald Trump’s trade overhaul have been exacerbated in 2026 by rising demand-side pressures related to the artificial intelligence build-out, economists broadly agree. That has spiked demand for skilled construction labor, building materials, electrical and computing components and energy.

“If it transpires the way that it has been going, that’s just old-fashioned demand overheating from excess stimulus that’s coming from massive hype about AI overloading the economy in the short run,” added Goolsbee.

Fed Governor Christopher Waller said in mid-October that AI-fueled inflation could persist for years, with the infrastructure and computing build-out projected to persist well into the 2030s. Other officials, like Cleveland Fed President Beth Hammack, have expressed doubt about the extent to which a couple of small rate hikes might meaningfully curtail AI data center demand.

Prospects for a half-point hike in December

Kevin Warsh, who took over as Fed chair in May, has been bullish about the medium-term “positive supply shock” that economists expect from the broad technology transition underway in the U.S. and global economy.

Though conceding that AI spending has led to higher aggregate demand in the economy, Warsh has been circumspect about the extent to which he sees AI fueling inflation. Officials like Goolsbee have been clearer on the impacts they see on inflation from AI-related spending and will bring that stance to the FOMC next year.

With one Fed policy meeting remaining in 2026, it was Waller who made headlines Tuesday when he suggested during an event hosted by the Bank of England that a 50-basis-point hike to the federal funds rate ought to be on the table in December.

Waller, who voted with the consensus to leave rates flat in October, went so far as to say that hiking by only a quarter-point next month could risk Fed credibility.

“Your colleague Christopher Waller has said he’s open to a larger-than-usual half-point interest rate increase in December,” PBS NewsHour Co-Anchor Geoff Bennett asked Goolsbee on Tuesday. “Given today’s inflation numbers, what do you think?”

“I’m not a fan of being very specific in tying our hands at the next meeting or meetings in the future,” responded Goolsbee.

“I will say, it’s literally the biggest table I’ve ever seen in my life in that room,” he added, referring to the board room in Washington, D.C., where the FOMC convenes eight times a year. “So everything is always on the table, and we must get inflation back down to target and it’s going the wrong way at this point.”